Tuesday, 22 March 2016

The United States is struggling with the high cost of healthcare.Notably, one cause of the high cost is the
price of pharmaceuticals.The importance
of the issue and the pressure is exemplified by the focus of the various
presidential candidates.Not
only are the Democratic candidates Bernie Sanders and Hilary Clinton concerned,
but so is Republican candidate Donald Trump.Interestingly, California, through an initiative, may directly confront
pharmaceutical pricing for many Californians.

One critique of the current system is that many
pharmaceuticals were developed using government funding.Thus, at least partially, the development
costs to create a pharmaceutical may have been borne by the public.Then, the argument goes, the public must pay
again (in many cases) through the supra-competitive price set by a
pharmaceutical company because of a patent.The public
essentially pays twice for the pharmaceutical.The Bayh-Dole Act essentially allows this to happen.However, the counter argument has been that
without the patent private industry would be unwilling to invest in
commercializing the invention.We would
end up with the pre-Bayh-Dole Act problem—inventions languishing on the
government shelf.The government,
through the Bayh-Dole Act, does retain some rights in government funded
inventions.One such right is the
ability to exercise march-in rights.March-in rights can be exercised in the following situations:

(a) With respect to any subject invention in which a
small business firm or nonprofit organization has acquired title under this
chapter, the Federal agency under whose funding agreement the subject invention
was made shall have the right, in accordance with such procedures as are
provided in regulations promulgated hereunder to require the contractor, an
assignee or exclusive licensee of a subject invention to grant a nonexclusive,
partially exclusive, or exclusive license in any field of use to a responsible
applicant or applicants, upon terms that are reasonable under the circumstances,
and if the contractor, assignee, or exclusive licensee refuses such request, to
grant such a license itself, if the Federal agency determines that such--

(1) action is necessary
because the contractor or assignee has not taken, or is not expected to take
within a reasonable time, effective steps to achieve practical application of the subject invention in such field of
use;

(2) action is necessary
to alleviate health or safety needs which are not reasonably satisfied by the
contractor, assignee, or their licensees; . . . .

Section 201 in 35
U.S.C., subsection (f) defines “[t]he term “practical
application” [to] mean[] to manufacture in the case of a composition or
product, to practice in the case of a process or method, or to operate in the
case of a machine or system; and, in each case, under such conditions as to
establish that the invention is being utilized and that its benefits are to the
extent permitted by law or Government regulations available to the public on
reasonable terms.”Part of the problem
is defining what are “reasonable terms.” Some scholars have rejected arguments that “march-in”
rights should include concerns with pricing.Additionally, the argument against the exercise of “march-in” rights is
that the uncertainty interjected into the ordinary process of the Bayh-Dole Act
would provide a disincentive for private industry to invest in the commercialization
of Bayh-Dole Act funded inventions. To date, March-in rights have never been exercised.

Notably, over 50 congresspersons sent a letter to the Director of the
National Institutes of Health [NIH] requesting that the NIH issue guidelines
defining when “march-in” rights should be utilized.The belief is apparently that the existence of guidance may provide an
incentive for pharmaceutical companies to set prices “reasonably” because of
fear of the actual exercise of rights.Apparently, right now, the belief is that they will never be
exercised.On March 16, in congressional hearings, BNA reported that the Director of the NIH noted that they are “open” to
exercising the rights.Will the indication
of “openness” to exercise rights cause the pharmaceutical industry to pause
before setting the price of a government funded pharmaceutical?Is current pressure from presidential
candidates and from a state like California enough to rethink the setting of
the price of pharmaceuticals?

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